By Huw Jones
LONDON (Reuters) - Regulators should complete work on their new bank capital rules without diluting them, otherwise it would be harder to draw a line under the financial crisis, a global central banking official said on Monday.
Claudio Borio, head of the monetary and economic department at the Bank for International Settlements, a forum for central banks, said the balance sheets of some lenders have still not been wiped clean of bad loans nearly a decade after the financial crisis began.
That crisis prompted world leaders to introduce tougher bank capital requirements, known as Basel III. Regulators will seek to complete Basel III at a meeting of the 28-country Basel Committee, which sets the standard for global regulation, on Monday and Tuesday in Chile.
Chile has been an observer on the Basel Committee since 2014 and the head of its SBIF banking regulatory body Eric Parrado told reporters in Santiago on Monday that he was hopeful a deal would be struck this week.
"The spirit is pretty collaborative," he said. "We are optimistic that in these two days an agreement will be reached."
Remaining elements of Basel III face stiff opposition from European Union policymakers, who are concerned they will bump up capital requirements and crimp lending.
"Prudential authorities should complete the financial reforms without delay, notably Basel III," Borio told a meeting of the EU's European Banking Authority on Monday.
"And in the process, they should not succumb to the pressure to dilute standards and should redouble efforts to repair balance sheets," Borio added.
Despite Borio's pleas, the draft proposals originally aired by Basel are widely expected to be rolled back after field tests showed they would lead to big hikes in capital for some lenders.
Bank of England Governor Mark Carney and the EBA both expect the remaining Basel rules to be scaled back significantly in parts.
EU financial services chief Valdis Dombrovskis has threatened to boycott the rules in the bloc if they increase capital requirements significantly. That would jeopardize an international approach to bank capital rules that was reinforced after the financial crisis.
Dombrovskis struck a more conciliatory tone on Monday, saying the EU was entering the talks in Chile with a view to reaching a "balanced solution".
Julie Dickson, a senior banking supervisor at the European Central Bank, said in Frankfurt on Monday the Basel Committee had a track record of getting agreement and she was hopeful that would happen this time.
(Additional reporting by Anthony Esposito in Santiago, Marilyn Haigh in Brussels and Andreas Kroener in Frankfurt; Editing by Susan Thomas and Meredith Mazzilli)